This Week at The Ninth: Unpaid Sellers and Trial Rights Removed | Morrison & Foerster LLP – Left Coast Appeals

This week, the Ninth Circuit determines whether an online produce wholesaler can sue under the Perishable Agricultural Commodities Act and answers a new question about whether a party that has contractually waived its rights to a jury trial may oppose the withdrawal of a jury request by an opponent.


The Court finds that the District Court erred in dismissing an online platform company’s claims under the Perishable Agricultural Products Act (“PACA”) for failure to file a claim because the company had plausibly alleged that it was a supplier or seller of unpaid products.

Sign: Justices Kelly, Jr. (CA10), M. Smith, Jr. and Forrest, with Justice Kelly writing the opinion and Justice M. Smith dissenting.

Climax: “[N]nothing in PACA or [S&H Packsing & Sales Co. v.] Tanimura [Distributing, Inc., 883 F.3d 797, 813 (9th Cir. 2018) (en banc)] prevents a company from purchasing products directly from a producer and then supplying those products to a distributor in such a way that the company receives PACA priority.

Background: In April 2019, Izguerra Produce, a produce merchant, purchased 1,600 25-pound cartons of avocados from Produce Pay, a company that buys and sells produce wholesale internationally through an online platform where producers can post their products for sale. After Izguerra failed to pay Produce Pay the full amount owed for the lawyers, Produce Pay sued Izguerra under PACA. Under PACA, sellers and suppliers of products have certain special protections against non-payment. The District Court dismissed Produce Pay’s PACA claims for failure to report, finding that Produce Pay was not a supplier or seller of products because it had limited its risk in the event that Izguerra did not sell any of the tradable products in a number of respects.

Results: The Ninth Circuit overthrown and returned. To state a PACA claim, the court explained that a plaintiff must allege (1) that the goods sold were perishable agricultural commodities, (2) that the buyer was a commission merchant, trader or broker, (4 ) that the transaction occurred pursuant to an interstate agreement or foreign commerce, (4) the seller has not received full payment for the transaction, and (5) the seller has preserved its rights of trust by including legal wording referring to the trust on its invoices. These elements were met, the court found, because the avocados were perishable, Izguerra is an avocado dealer, the transactions were for interstate or foreign commerce, Produce Pay alleged an unpaid balance, and the The lawyers’ initial invoice indicated that they were sold under the PACA statutory trust scheme. The only question, the court continued, was whether Produce Pay was an unpaid supplier or seller, since PACA protects the interests of suppliers and sellers of products, but does not protect the interests of parties who are only lenders. . The court rejected Izguerra’s argument that Produce Pay was not a seller because the avocados were sold to Izguerra directly by the producer, contrary to Izguerra’s allegations and the transaction documents attached to its complaint, which showed that Produce Pay had title to avocados. It doesn’t matter that Produce Pay never physically possessed the lawyers since in the perishables industry, physical possession alone is a poor indicator of who holds title. The District Court erred in applying the risk transfer test described in Tanimura because Tanimura (unlike this case) involved an accounts receivable factoring agreement, decided whether certain assets were part of a PACA trust (not whether a plaintiff was a supplier or vendor), and was decided by summary judgment (and not on a motion to dismiss).

Justice M. Smith dissented. He would have concluded that Produce Pay was not an unpaid seller or supplier of products because the entire pleadings, including the exhibits to the complaint and incorporated by reference, pointed to an alternate mode of financing, under which Produce Pay advanced a loan to a wholesaler and used the avocados and their product as collateral. Therefore, Judge M. Smith would have ruled that while Produce Pay could sue to recover its investment in contract or tort, it was not entitled to the protections of the PACA.


In a matter of first impression, the Court held that Federal Rules of Civil Procedure 38 and 39 do not permit a litigant to rely on an opposing party’s waiver of jury trial where the party claiming to have contractually waived his rights to a jury trial.

Sign: Justices Tallman, Christen and Block (EDNY), with Justice Christen writing the opinion.

Climax“The consent requirement of Rule 39(a) generally serves to protect [jury trial] the rights of a party who did not make the original jury request, but Rule 39 grants that party “no new or independent right to a jury trial”; it merely protects the rights to a jury trial that [nonrequesting party] may have been granted elsewhere.

Background: From 1996 to 2016, Ross Dress for Less, Inc. leased the Richmond Building, a five-story Portland Oregon Building property, and its 12-story neighbor, the historic Failing Building. Three of the building floors were connected by concrete slabs. Upon expiration, the lease on the Richmond building required Ross to return the property “in good order, condition and condition except for reasonable wear and tear” and to “bring such alterations to the building then erected on the leased premises as … necessary to constitute such a building into a fully independent and self-sufficient structure. The lease also provided that “[t]Tenant waives any right to a jury trial in any summary or other legal proceeding instituted by Landlord against Tenant with respect to the Leased Premises. »

In 2014, Ross sued Makarios-Oregon, owner of the Richmond building, and Walker Place, then owner of the failing building. Ross sought declaratory relief that he was only obligated to physically separate the Richmond and Failing buildings, and not to perform any other work when his lease expired. The defendants counterclaimed for breach of contract and sought their own declaratory judgment regarding Ross’ work obligations. Both Ross and Makarios demanded a jury trial.

The litigation was divided into two phases, one dealing with the declaratory judgment and the other with the other claims and damages. The parties waived any right to a jury trial with respect to the first phase and, after a trial en banc, the district court ruled that Ross’ proposed work plan was insufficient under the lease, but that it was not obliged to carry out all of the work proposed by the owners. The parties have filed new requests for jury trials for the second phase of the litigation. But when Makarios decided to withdraw his request for a jury trial, Ross objected, arguing that he had the right to rely on Makarios’ request under Federal Rules of Civil Procedure 38 and 39. The The court nonetheless granted Makarios’ removal, finding that the jury trial waiver of the lease precluded Ross’ objection. After a second trial, the district court awarded Makarios nearly $3 million and the parties cross-appealed.

Results: The Ninth Circuit upheld the district court’s granting of Makarios’ motion to withdraw his request for a jury trial. (Other issues were decided in a separate decision memorandum).

The Court initially ruled that Ross had waived his rights to a jury trial and that the scope of the lease waiver clause included those proceedings. While Ross initially sued, the Court interpreted the phrase “legal proceedings. . . Instituted by Owner” to encompass Makarios’ counterclaims. Because the meaning of the lease was unambiguous and the parties did not dispute whether the waiver was conscious and voluntary, the Court held that Ross had contractually waived his right to a jury trial as to Makarios’ counterclaims.

Then, in a matter of first impression in the Ninth Circuit, the Court ruled that Federal Rules of Civil Procedure 38 and 39 did not allow Ross to rely on Makarios’ waiver of a jury trial when Ross had already contractually waived his rights to a jury trial. Rule 38(d) provides that a request for a full jury trial “cannot be withdrawn unless the parties consent”. Rule 39(a) requires a trial by jury “on all issues so requested” unless the parties otherwise provide, or where “the court, on motion or on its own initiative, finds that on some or all these issues, there is no federal right to a jury trial. Read together, these two rules generally prevent a party from unilaterally withdrawing its request for a jury trial. But this principle is not without limits. Based on a Fifth Circuit decision, the Court held that while the rules generally protect the rights to a jury trial of the party that did not make the original request, Rule 39 does not grant that party “no new or independent right to a jury trial”; it merely protects the rights to a jury trial that [nonrequesting party] may have been granted elsewhere. Because Ross had waived his jury trial rights, he could not object to Makarios’ removal.

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